Atlanta_Reed_Fundamentals_Feb_2010

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                                        Reed Market                       All Property                Atlanta                   2 Feb          Page 2
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ECONOMIC OVERVIEW
Sources: PPR; Moody’s Economy.com

Metro Economic Trends
Atlanta continues to struggle, as the monthly job numbers continue to shrink. Over the past year, total employment fell by about 4.9% (or 116,400
jobs) here, versus 3.5% at the national level. That said, it does seem that job losses are decelerating. Over the past three months (as of November),
employment only fell by 0.3%. Distress is still highly concentrated in construction, manufacturing, professional services, trade, and finance. These steep
declines are likely a result of Atlanta’s high exposure to national retail (due to distribution and headquarters operations here), the near complete
shutdown in home construction, and its below-average exposure to stabilizing industries (i.e., government and education and health services). When all
is said and done, roughly 220,000 jobs will have been lost in Atlanta (significantly outpacing the losses sustained during the last downturn). This
represents about 10% of the metro's total employment base. Consequently, the metrowide unemployment rate is skyrocketing and has jumped more
than 400 basis points from the end of 2008 to 10.4% in November. Though more pain is on the way, there is an end in sight. The job losses are
expected to begin subsiding by late next year, a few quarters later than national average job losses. The only sector to emerge relatively unscathed from
this downturn will be education and health services.

The news is not all bad for Atlanta, as some firms have recently announced plans to expand their presence here. NCR, a tech-related firm, is
planning to relocate its headquarters from Dayton, OH, to Duluth, bringing 1,250 jobs to Gwinnett County. Currently, the firm maintains a 100,000 SF
campus on Satellite Road and will take another 100,000 SF–200,000 SF of office space there. Verizon Wireless is also adding to local payrolls, with
plans to open a customer service center in Alpharetta that will create an additional 600 jobs for the area. First Data, which is relocating its headquarters
to Atlanta from Denver, plans to create up to 1,000 new jobs over the next three years. Although these expansions are a positive sign for the Atlanta
economy, the metro must still contend with a solid chunk of economic distress in the near term. In fact, firms continue to hand out pink slips in order to
cut costs. Rite Aid has closed its distribution center in Newnan (eliminating 297 jobs), and the AJC is looking to cut another 245 jobs.

Despite minimal exposure to growth industries (i.e., tech and energy), the Atlanta economy is expected to see a solid recovery. In fact, the five-
year forecast employment growth, at 2.6% per year, will put this metro at the top of the PPR54. Strong population growth will support expansion in the
government, education and health services, and retail. The trade, transportation, and warehousing sectors will also help drive the metro’s economic
recovery, as Atlanta is centrally located for moving "stuff" around the country to consumers. Also, look for higher-paying service jobs in business and
finance, the tourist industry, and construction to help drive growth in the long run here. However, more muted in-migration and population growth could
derail Atlanta’s job recovery. Updated: 07-Jan-2010

U.S. Economic Trends
The U.S. economy expanded in the third quarter of 2009 for the first time since the second quarter of 2008, growing by 2.2% (annualized). Government,
consumers, and exports all pitched in to support the recovery; business investment was the only modest exception. And while demand picked up, more
of it was supplied from new production rather than existing inventory.

The pickup in third quarter GDP growth was a welcome sign that the recession is over. Yet stimulus initiatives were instrumental to the recovery, calling
into question its strength and durability. Policy support extended well beyond the 8% increase in federal spending. The cash-for-clunkers program, which
ended in August, led to a 20% jump in durable-goods consumption. The homebuyer tax credit (recently extended to April 2010) and low mortgage rates
— engineered in part through the Federal Reserve’s commitment to purchase $1.5 trillion of mortgage securities and Agency debt — helped spark a
19% spike in residential investment, ending 14 straight quarters of decline. These components accounted for two-thirds of the economy’s growth, not
counting the additional support to state and consumer spending provided by other transfers and tax breaks. Meanwhile, the labor market remains
abysmal. December saw 85,000 job losses, bringing the total to 7.2 million since December 2007, while the unemployment remains stuck in the double
digits (10%) for the first time since 1983.

Still, there is no denying the nascent signs of recovery. Financial conditions are improving: capital markets have begun to thaw, evidenced by the 70%
rally in stock prices since March 2009 and lower yields on corporate debt. Aggressive cost cutting and improved financial-sector performance (helped by
an upward-sloping yield curve and reduced competition) have stoked corporate profits, an important internal source of investment capital. And home
prices have tentatively stabilized. The combination of rising asset values, stronger corporate earnings, and ongoing stimulus funding will sustain
domestic spending. Meanwhile, robust growth in emerging markets, coupled with a depreciating dollar, should support healthy gains in exports. Once
businesses exhaust internal efficiencies, hiring and investment should follow, and rising employment and wages should, in turn, drive consumption.
Moreover, the inventory cycle, which added nearly one percentage point to GDP growth in the third quarter, has several more quarters to run.

But unlike the robust recoveries that followed deep recessions in the past, this one will be painfully sluggish. Temporary employment, a leading indicator
of broader employment, has been rising since August, but average hours worked are at an all-time low, leaving firms with ample capacity to boost output
before beginning to hire new employees. Despite recent stock market gains, household wealth is still $11 trillion below its peak, and struggling regional
and local banks continue to curb lending, factors that will continue to weigh on consumer spending. And sooner or later, extraordinary fiscal and
monetary support will need to be withdrawn in the face of mounting long-run budgetary and inflationary concerns. Updated: 12-Jan-2010




PROPERTY AND PORTFOLIO RESEARCH                                                   NORTH AMERICA                     EUROPE                 ASIA-PACIFIC
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                                                                               Reed Market                                                          All Property                                    Atlanta                                       2 Feb                   Page 3
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Employment Trends
                                                                                                                                                                                                    Annual Growth Rates
                                                                                             Current Value                                                    Current                                              Past Decade                                         Forecast
                                                                                               Dec 2009                                                       Dec 2009                                             (2000 - 2009)                                     (2010 - 2014)
                                                                                                        Location
NAICS Category                                                                          Employment*    Quotient**                                     Metro      U.S.                 PPR54           Metro             U.S.                 PPR54    Metro              U.S.        PPR54
Manufacturing                                                                                   143          0.71                                   -10.5 %    -9.9 %                 -7.3 %         -3.9 %           -3.9 %                 -3.6 %   1.2 %             0.6 %         0.8 %
Trade, Transportation and Utilities                                                             499          1.16                                    -6.7 %    -3.4 %                 -3.7 %         -0.7 %           -0.4 %                 -0.4 %   1.8 %             1.2 %         1.4 %
          Retail Trade                                                                          241          0.95                                    -5.2 %    -2.8 %                 -3.2 %         -0.7 %           -0.3 %                 -0.3 %   2.1 %             1.2 %         1.3 %
          Wholesale Trade                                                                       140          1.44                                   -10.4 %    -4.0 %                 -4.5 %         -1.1 %           -0.5 %                 -0.2 %   1.0 %             1.5 %         1.6 %
          Transportation, Warehouse, Utilities                                                  119          1.46                                    -5.0 %    -4.7 %                 -3.9 %         -0.2 %           -0.5 %                 -0.8 %   2.2 %             1.0 %         1.1 %
Financial Activities                                                                            139          1.05                                    -7.5 %    -3.9 %                 -3.5 %         -0.6 %            0.0 %                 -0.1 %   2.4 %             1.7 %         1.5 %
Government                                                                                      339          0.87                                     0.2 %    -0.3 %                 -0.6 %          2.3 %            0.9 %                  1.0 %   2.1 %             1.2 %         1.4 %
Natural Resources, Mining and Construction                                                       98          0.86                                   -17.2 %   -13.4 %                -12.2 %         -2.6 %           -0.9 %                 -0.7 %   5.7 %             2.9 %         2.7 %
          Construction                                                                           96          0.94                                   -17.4 %   -13.7 %                                -2.5 %           -1.2 %                 -0.9 %   5.8 %             3.2 %         2.8 %
          Natural Resources and Mining                                                            1          0.11                                    -6.8 %   -10.9 %                                -4.8 %            1.7 %                  1.8 %   2.1 %             0.6 %         1.6 %
Education and Health Services                                                                   268          0.80                                     2.2 %     2.0 %                       1.6 %     3.6 %            2.7 %                  2.6 %   3.6 %             2.8 %         3.0 %
Professional and Business Services                                                              365          1.26                                    -6.5 %    -3.1 %                      -3.6 %    -0.4 %            0.3 %                  0.4 %   4.6 %             3.2 %         2.9 %
Information                                                                                      78          1.60                                    -5.2 %    -4.6 %                      -5.0 %    -2.7 %           -2.2 %                 -2.0 %   1.2 %             1.3 %         1.1 %
Leisure and Hospitality                                                                         233          1.03                                     0.7 %    -1.6 %                      -1.8 %     1.8 %            1.2 %                  1.4 %   4.7 %             3.1 %         2.6 %
Other Services                                                                                   98          1.06                                     1.2 %    -1.9 %                      -1.7 %     0.7 %            0.5 %                  0.8 %   3.3 %             2.2 %         1.8 %
Total Employment                                                                              2,259          1.00                                    -4.4 %    -3.1 %                      -3.0 %     0.0 %            0.1 %                  0.2 %   3.1 %             2.0 %         2.0 %
*In Thousands           **Location Quotient measures the concentration of an industry within a metro relative to that of the nation.


Job Growth Year-Over-Year                                                                                                                                Largest Contributors to Job Growth Over Last 6 Months
                                                                                                                                                         As of Dec 2009


                                                               Metro                 U.S.                                                                      2,100
                                                                                                                                                                         2,020                                             1,590
                                                                                                                                                                                                     1,420
     8%                                                                                                                                                        1,400

     6%
                                                                                                                                                                700
     4%

     2%                                                                                                                                                           0

     0%
                                                                                                                                                               -700                                                                                                          -380
    -2 %                                                                                                                                                                                                                                              -1,100

    -4 %                                                                                                                                                      -1,400
                                                                                                                                                                          Educ/Hlth Svcs




                                                                                                                                                                                                      Government




                                                                                                                                                                                                                               Hospitality




                                                                                                                                                                                                                                                       Information




                                                                                                                                                                                                                                                                             Other
    -6 %

    -8 %
       1995
              1996
                     1997
                            1998
                                   1999
                                          2000
                                                 2001
                                                        2002
                                                                2003
                                                                       2004
                                                                              2005
                                                                                     2006
                                                                                            2007
                                                                                                   2008
                                                                                                          2009
                                                                                                                 2010
                                                                                                                        2011
                                                                                                                               2012
                                                                                                                                      2013
                                                                                                                                             2014




PROPERTY AND PORTFOLIO RESEARCH                                                                                                                               NORTH AMERICA                                              EUROPE                                       ASIA-PACIFIC
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Quarterly Changes in Total Employment

                                                                          Metro (Thousands)          U.S. (Thousands)


                           60                                                                                                                               1,400



                           40
                                                                                                                                                            700


                           20
       Metro (Thousands)




                                                                                                                                                                      U.S. (Thousands)
                                                                                                                                                            0

                            0

                                                                                                                                                            -700
                           -20


                                                                                                                                                            -1,400
                           -40



                           -60                                                                                                                              -2,100
                             1994   1995   1996   1997     1998   1999   2000     2001        2002    2003     2004     2005   2006   2007   2008    2009


Major Employers
Atlanta is a headquarters market and boasts 13 Fortune 500 Companies. As a result, many of the major employers in the metro are big dogs. This list
includes Delta Airlines (26,000), Wal–Mart Stores, Inc. (25,000), AT&T (21,000), Home Depot (9,100), IBM (7,000), and SunTrust Banks, Inc (6,700).
Unfortunately, layoffs are plaguing some of the firms that make up this list, as the battered consumer, weakened housing market, and financial crisis
weigh heavily on individual and business spending. Cyclical industries such as airlines, housing, and financial services are facing the most risks. For
instance, Delta Airlines announced it will cut at least 2,100 jobs this year using voluntary buyouts and/or layoffs, on top of the 4,000 employees that took
buyouts last year. Delta is also renewing its lease at Hartsfield-Jackson Airport (the first time in 30 years), which could provide risk to up or downside.
Home Depot announced that 462 jobs would be cut at its headquarters in Cumberland and that it would be closing all of its Expo business. Although
many of the major employers do not expect to implement major layoffs, most have hiring and salary freezes, including SunTrust, Turner Broadcasting,
UPS, and Coca–Cola. Given the severity of the recession and expectations for continued deterioration, layoffs are not off the table.

Atlanta's several universities and hospitals will help buoy job growth in this cycle. Emory University (10,400), WellStar Health System (8,500), and
Northside Hospital (7,100) are some of the metro's major employers. Yet the education and health services industry is 20% less concentrated here than
at the national level (0.8 location quotient). Though this sector maintains a below–average concentration in Atlanta, it did actually posted job growth over
the past year, expanding by 1.9% year–over–year as of August. In addition, this is the only employment sector (besides government) that is expected to
remain in the black during this recession. At about 2.1% per year, forecast growth in this sector will be among the fastest in Atlanta – helping to lead a
solid recovery. Updated: 07-Jan-2010




PROPERTY AND PORTFOLIO RESEARCH                                                                      NORTH AMERICA                    EUROPE                ASIA-PACIFIC
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Employment Concentration Relative to the U.S.

                                         Other Services


                               Leisure and Hospitality


                                            Information


                  Professional and Business Services


                       Education and Health Services


          Natural Resources, Mining and Construction


                                           Government


                                   Financial Activities


                    Trade, Transportation and Utilities


                                         Manufacturing
                                                          0    0.2             0.4            0.6      0.8            1.0           1.2        1.4         1.6            1.8        2.0




POPULATION AND MIGRATION TRENDS
Sources: PPR; Moody’s Economy.com

Demographic Trends
                                                                                                                            Annual Growth Rates
                                                   Current Value                                Current                             Past Decade                            Forecast
                                                     Dec 2009                                   Dec 2009                            (2000 - 2009)                        (2010 - 2014)
                                           Metro          U.S.        PPR54           Metro        U.S.      PPR54          Metro        U.S.     PPR54          Metro        U.S.     PPR54
Population*                                5,530      308,560        166,460          1.9 %       1.0 %       0.9 %         2.8 %       1.0 %      1.1 %         2.1 %       1.0 %      1.1 %
Households*                                2,014      115,299         61,412          1.6 %       0.8 %       0.9 %         2.7 %       0.9 %      1.1 %         2.3 %       1.2 %      1.3 %
Median Household Income                  $53,810      $50,699        $56,540         -2.8 %       1.6 %      -3.8 %         0.5 %       2.2 %      1.6 %         4.3 %       2.6 %      2.8 %
Labor Force*                               2,642      153,059         83,617         -2.7 %      -1.0 %      -0.8 %         1.4 %       0.9 %      0.8 %         3.5 %       0.9 %      1.4 %
Unemployment**                            10.3 %       10.0 %          9.7 %          9.8 %       9.3 %       9.1 %         5.1 %       5.5 %      5.4 %         7.3 %       7.8 %      8.0 %
*In Thousands   **The Unemployment Rate provided in the Annual Growth Rates section is the average unemployment rate during the specified period.


Population & Migration
Over the long run, below–average living costs and a large, diverse economy will help attract new residents (especially those in the younger
age cohorts) to the metro. Atlanta has expanded rapidly during the boom years, as young professionals have been attracted to affordable housing,
above–average incomes, and a thriving job market. Recently, however, population growth in this metro has slowed from its heated pace during the
housing boom, as hefty job losses have plagued the market. Still, growth in the metro’s population base continues to nearly double the national average,
at 1.9% year–over–year as of September, as more than 54,000 residents moved into Atlanta. Yet this rate is roughly half what it was in 2005 and 2006.
An above–average percentage of the population over 25 years old in Atlanta has earned a bachelor's degree. The highly educated labor force helps to
attract well–paying jobs and corporate relocations to the metro. And once job growth returns to Atlanta in early 2011, population growth and in–migration
will gain more momentum. However, the depress housing market at the national level could dampen Atlanta’s outlook for in-migration, as homeowners
underwater on their mortgages are now less mobile. Updated: 03-Dec-2009




PROPERTY AND PORTFOLIO RESEARCH                                                                      NORTH AMERICA                            EUROPE                        ASIA-PACIFIC
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                                        Reed Market                      All Property                Atlanta                   2 Feb          Page 6
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Net Migration                                                                          Population by Age and Educational Attainment
                                                                                                                                    Rank
    100                                                                                 Age Cohort                         Value    of 54      U.S. Value
                   99                                                                   Total Population (000s)            5,530        7        308,560
                                                                                        <20 / Children                    28.7 %        9         26.9 %
                                                                                        20-34 / Young Adult               21.7 %       13         20.6 %
    80
                                                                                        20-65 / Working Age               62.9 %        7         60.2 %
                                  68                                                    35-54 / Prime Spenders            30.9 %        2         28.0 %
                                                                                        65+ / Retirement Age               8.3 %       53         12.9 %
                                                          58                            % > 25 with Bachelor Degree       31.4 %       13         24.6 %
    60

                                             45

    40



    20




     0
                 2006          2007         2008         2009




Demographics
Atlanta is one of the younger metros in the Southeast, with a median age of about 33 years, roughly two years younger than the national median.
Clearly, the metro has a very high share of residents aged 20–34 (those most likely to rent apartments). At 22% of the population, this group is sizable
enough to rank Atlanta in the top 15 of the PPR54 for this metric. Atlanta also maintains one of the highest percentages of prime spenders in the PPR54,
at about 31% of the metro's population base. An above–average percentage of the population over 25 years old in Atlanta has earned a bachelor's
degree. The highly educated labor force helps to attract well–paying jobs and corporate relocations to the metro. That said, metros like Seattle, with a
large tech-based economy, and D.C., which maintains stability from the government, may be more attractive to would-be migrants (especially young job
seekers) than Atlanta. Updated: 05-Oct-2009

Costs
Atlanta falls in the middle of the pack in terms of living costs, coming in at roughly 2% below the national average. Slightly cheaper housing costs and a
young, diverse economy has attracted a large number of people to the metro over the past several years. This trend will likely continue, as Atlanta will
remain a bargain when compared to other major cities (such as New York and LA). In terms of business costs, Atlanta ranks in the bottom quartile in the
PPR54. As a result, corporate relocations here are very common. Firms are also attracted to the metro's maturing economy and a massive pool of
young, educated workers to draw from. Atlanta should continue to see more firms set up shop and/or expand their operations here in the future. Updated:
07-Jan-2010




PROPERTY AND PORTFOLIO RESEARCH                                                  NORTH AMERICA                        EUROPE                ASIA-PACIFIC
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                                                    Reed Market                                  Apartment                           Atlanta                         2 Feb            Page 7
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SUPPLY, DEMAND, AND VACANCY TRENDS
Sources: PPR; Moody’s Economy.com; Reed Construction Data

Supply, Demand, and Vacancy Statistics                             As of 2009Q4

                                                                                             Annual Trends
                                                2006            2007                  2008               2009            2010               2011              2012             2013              2014
Change in Supply*                              4,139           7,384                 9,045              7,136              889               585             3,331            6,509             8,637
Change in Demand*                              9,039           4,786                -1,314             -1,399           -1,578             4,759            10,439           12,851            10,667
Vacancy Rate (Q4)                              8.7 %           9.3 %               11.8 %             13.7 %           14.3 %             13.2 %            11.3 %            9.6 %             8.9 %

                                                                                        Quarterly Trends
                                             2008Q4          2009Q1            2009Q2                 2009Q3           2009Q4            2010Q1         2010Q2              2010Q3            2010Q4
Change in Supply*                               2,689           2,262            2,128                    767            1,979                689           200                   0                 0
Change in Demand*                              -1,938          -2,103              972                     95             -364             -1,000          -542                -341               305
Vacancy Rate                                  11.8 %          12.8 %            13.1 %                 13.2 %           13.7 %            14.1 %         14.3 %              14.4 %            14.3 %
*In Units


Quarterly Supply, Demand, and Vacancy                              As of 2009Q4




                                                                     Change in Demand            Change in Supply         Vacancy Rate


                  5,100                                                                                                                                                                20 %


                                                                                                                                                                                       18 %


                  3,400                                                                                                                                                                16 %


                                                                                                                                                                                       14 %


                  1,700                                                                                                                                                                12 %
        (Units)




                                                                                                                                                                                       10 %


                      0                                                                                                                                                                8%


                                                                                                                                                                                       6%


                  -1,700                                                                                                                                                               4%


                                                                                                                                                                                       2%


                  -3,400                                                                                                                                                               0%
                      1995    1996   1997    1998   1999    2000     2001   2002      2003     2004     2005    2006   2007   2008     2009   2010   2011     2012   2013     2014


Historical and Forecast Summary                         As of 2009Q4

                           Historical Peak and Trough                                          Historical Volatility                            Average Annual Growth Rates
                                                                                                                                                           Historical               Forecast
                                 Peak         Period       Trough         Period                                                                        Metro      PPR54         Metro    PPR54
Vacancy Rate                    13.7 %       2009Q4          3.9 %       1994Q3        Supply Volatility Ratio            1.95       Supply             3.3 %       1.5 %        1.0 %     0.6 %
Demand (Annual)                14,110*         1986        -1,399*         2009        Demand Volatility Ratio            1.87       Demand             3.1 %       1.4 %        2.1 %     1.1 %
Supply (Annual)                16,626*         2002        -1,716*         1992        Correlation                        0.29       Net Demand        -0.2 %      -0.1 %        1.1 %     0.5 %
*In Units


Demand Trends
There is another year of pain in store for the Atlanta apartment market, but the long-run outlook is positive. The deterioration in fundamentals
started to dissipate at the end of 2009, as levels of shadow supply in the for-sale housing market stabilized due to increasing home sales last year. That
said, the odds are still not in the metro’s favor. Another wave of residential foreclosures is set to hit the market later this year, as more option arms begin
to reset, which will drive the shadow inventory back up. The housing-induced recession has also dampened mobility at the national level. Although
Atlanta’s population base continues to expand at twice the national average (1.9% year-over-year as of September), this is about half the rate seen
during the housing boom. These weaker-than-normal demographic trends will continue to weigh on apartment demand.

Despite these headwinds, Atlanta is positioned to have one of the strongest recovery stories in the PPR54. This is a young metro, and outsized
growth, especially in the 20–34-year-old age cohort, will drive above-average formation of apartment-renting households over the next five years. In fact,
nominal apartment demand from 2009–14 will equate to nearly 11% of Atlanta’s current apartment inventory, besting the PPR54 average by about six



PROPERTY AND PORTFOLIO RESEARCH                                                                                NORTH AMERICA                         EUROPE                      ASIA-PACIFIC
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percentage points. In terms of demand growth, the metro is expected to see gains of 2% per year during the forecast – ranking Atlanta in the top quartile
of the PPR54. Updated: 25-Jan-2010

Supply Trends
The for-sale housing market’s problems are having some serious implications for the local rental market in Atlanta, as shadow supply
continues to enter the competitive rental pool. Residential developers became overzealous during the housing boom. With unsold inventories and
foreclosures still climbing, the shadow market is expanding. Continued depression in the local condo market will likely cause more of this repositioning
over the next year or so, which will continue to pad the rental stock. Areas of above-average risk for this trend include Midtown and Buckhead
(specifically Brookhaven and Lindbergh).

Developers are proposing a fair number of new apartment projects, but very few are moving forward. Over the next 18 months, ground-up supply will be
less of a risk. Developers with projects in the planning pipeline are hesitant to break ground in this environment, allowing new supply deliveries to remain
relatively minimal in the near term. In fact, several planned projects have been put on hold or even canceled, which will dampen new supply deliveries
here in the near term. Though at least one of these developments shows up in just about every submarket in the metro, the Midtown/Brookwood area
rises to the top of the list, with four projects that are being reevaluated. These include the 297-unit Cirque at Metropolitan Center and the 360-unit
Morningside. Some of these projects will likely rise from the ashes of this recession later in the forecast. Atlanta remains a low-barrier-to-entry market
where large projects can pop up quickly, and no submarket is really safe from supply-side risks in the long run.

Developers are looking to tap into future growth in South Fulton County, and several mixed-use projects (with an apartment component) have
come to the table recently. Over the past several years, development was focused north of the city, following demographic shifts. Now that the
population base has begun to expand south of Atlanta proper, infill projects are beginning to pop up in this area. Mostly known as a major warehouse
node, this submarket is becoming more popular with office tenants and residents looking to live close to the metro's urban core. In fact, from 2000–08,
the population ballooned to more than 380,000 residents - a 23% increase. This growth bodes well for future office and apartment demand in South
Fulton County. However, developers are beginning to ramp up their activity. For instance, Oxford Properties is planning to build townhouses and
apartments in Hapeville. Look for more rental projects to get off the ground here once the credit markets thaw. Updated: 25-Jan-2010

Major Construction Projects
                                                                                                                                                                   Size         Target            Target
Title                                                                                             Submarket                   City           Status              (Units)           Start      Completion
Sorelle Apartments                                                                                Buckhead/Sandy Springs      ATLANTA        Underway               401       Nov 2006          Mar 2009
Alexan Midtown West                                                                               Midtown                     Atlanta        Underway               397       Dec 2007          Nov 2009
The Goodwynn at Town Brookhaven                                                                   Buckhead/Sandy Springs      ATLANTA        Underway               372       Apr 2008          Dec 2009
Woodside Vista                                                                                    South Fulton                ATLANTA        Underway               370       Sep 2007          May 2009
Gables Century Center                                                                             Dekalb/Rockdale             ATLANTA        Underway               359        Jul 2007         Mar 2009


Multifamily Permits                                                                                                           Multifamily Underway by Subclass
   13,000
                                                                        12,043
   10,400                                     9,008

    7,800            6,544

    5,200

    2,600
            994                                                                                                                    Condo/Townhouse        89 %

       0                                                                                                                           Apartments                          11 %
            YTD




                      YTD Previous Year




                                               5-Year Annual Average




                                                                         10-Year Annual Average




PROPERTY AND PORTFOLIO RESEARCH                                                                                                 NORTH AMERICA                     EUROPE                   ASIA-PACIFIC
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                                            Reed Market                               Apartment             Atlanta                          2 Feb          Page 9
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CONSTRUCTION COSTS
Source: Reed Construction Data

Construction Cost Index                                                                                      Construction Cost/SqFt

                                 Construction Cost Index          Year-Over-Year Growth                                               Metro      U.S.

      200                                                                                           14 %       $200
                                                                                                                                      $176                           $175
                                                                                                    12 %

      160                                                                                           10 %       $160   $150                           $146
                                                                                                    8%

      120                                                                                           6%         $120
                                                                                                    4%

       80                                                                                           2%          $80
                                                                                                    0%
       40                                                                                           -2 %
                                                                                                                $40
                                                                                                    -4 %
       0                                                                                            -6 %
                                                                                                                $0
            2002     2003        2004         2005         2006          2007        2008    2009                            2008Q4                         2009Q4




HOUSING TRENDS
Sources: PPR; Moody’s Economy.com

Single-Family Housing Trends
Signs of stabilization are starting to surface, but has the market really turned? As of September, the Case-Shiller index for home prices in Atlanta
were down 9.3% on a year-over-year basis, and home prices are in line with levels seen earlier in the decade. That said, the index remained flat when
compared to the second quarter and even jumped 1.1% since the first quarter. Steep discounts are likely bringing buyers back to the negotiating table,
but the overhang of unsold homes could take some time to burn off. Luckily, Atlanta is expected to maintain a steady stream of new residents coming
into the metro. Solid in–migration will help eat away at this overhang, especially now that homeownership has become even more affordable. Updated:
28-Dec-2009


Condo Trends
Weakness in the condo market is beginning wane. Yet, Buckhead and Midtown in particular are still facing a significant amount of pressure, as
developers brought on a lot of new product in recent years. Consequently, distress in the market has caused some ground–up condo developers to
implement “Plan B” by either converting units to apartments or auctioning office units. Overall, the in–town condo market will continue to face headwinds
in the near term, and pressure from the growing shadow inventory will weigh on apartment fundamentals. Updated: 28-Dec-2009




PROPERTY AND PORTFOLIO RESEARCH                                                             NORTH AMERICA              EUROPE                        ASIA-PACIFIC
                             R
                                                     Reed Market                                                 Apartment                                    Atlanta                                                2 Feb                          Page 10
                                                     Fundamentals                                                                                                                                                    2010



Single-Family Permits                                                                                               Home Price Index (Base Year: 1993)
    43,000                                                                                                                                                                    Metro                    PPR54
                                                                                    42,537
                                                           32,744
    34,400                                                                                                              300

    25,800
                                                                                                                        240
    17,200                   12,307

     8,600    5,397                                                                                                     180

        0
               YTD




                                 YTD Previous Year




                                                            5-Year Annual Average




                                                                                     10-Year Annual Average
                                                                                                                        120


                                                                                                                         60


                                                                                                                         0




                                                                                                                          1995
                                                                                                                                 1996
                                                                                                                                        1997
                                                                                                                                               1998
                                                                                                                                                      1999
                                                                                                                                                             2000
                                                                                                                                                                    2001
                                                                                                                                                                           2002
                                                                                                                                                                                  2003

                                                                                                                                                                                         2004
                                                                                                                                                                                                2005
                                                                                                                                                                                                       2006
                                                                                                                                                                                                              2007
                                                                                                                                                                                                                     2008
                                                                                                                                                                                                                            2009
                                                                                                                                                                                                                                    2010
                                                                                                                                                                                                                                           2011
                                                                                                                                                                                                                                                  2012
                                                                                                                                                                                                                                                         2013
                                                                                                                                                                                                                                                                2014
Single-Family Housing Statistics
                                                                                                         Metro                                                                                            United States
                                                                                                                                          Rank of 54
                                                     Current (2009Q4)               Year-Ago                        Growth                 (Current)                              Current (2009Q4)                                 Year-Ago                     Growth
Median S-F Home Price                                        $123,330               $130,480                         -5.5 %                       47                                      $172,890                                 $181,500                      -4.7 %
Median Household Income                                        $53,810               $55,332                         -2.8 %                       24                                        $50,699                                 $49,913                       1.6 %
S-F Home Price / HH Income                                          2.3                   2.4                                                     51                                             3.4                                     3.6
Home Ownership Rate                                                                   69.3 %                                                                                                                                         68.1 %




PROPERTY AND PORTFOLIO RESEARCH                                                                                        NORTH AMERICA                                                       EUROPE                                           ASIA-PACIFIC
                                          R
                                                       Reed Market                               Hotel                             Atlanta                         2 Feb           Page 11
                                                       Fundamentals                                                                                                2010



SUPPLY, DEMAND, AND OCCUPANCY TRENDS
Sources: PPR; Moody’s Economy.com; Smith Travel Research

Occupancy Summary
Both tourists and business travelers fill Atlanta's hotel rooms. That advantage is a double whammy right now, as both leisure and business travel are
struggling as individuals and corporations pinch pennies. With fewer travelers, hotel occupancies are headed south. Peak-to-trough occupancy declines
will total 16 percentage points in this cycle, as occupancies fall well below their 2002 lows. Supply additions in the near term will be relatively muted,
allowing the market some breathing room and time to recover. Trough-to-2014 occupancy gains will total 14% percentage points, ranking the market fifth
in the PPR54. Updated: 29-Jan-2010

Supply, Demand, and Occupancy Statistics                                 As of 2009Q4

                                                                                              Annual Trends
                                                       2006             2007              2008             2009           2010              2011            2012            2013             2014
Demand (Rooms)                                        -1,109           -1,198           -3,340           -4,493           -481             1,712           4,948           5,024            2,920
Supply (Rooms)                                        -1,229                3            1,072            2,307            306               414             437             656              853
Occupancy Rate (Q4)                                  64.4 %           63.1 %           58.8 %           52.7 %          52.1 %            53.6 %          58.5 %          63.2 %           65.6 %
*In Rooms


Supply, Demand, and Occupancy Year-to-Year

                                                                      Change in Demand           Change in Supply       Occupancy Rate


                 10,800                                                                                                                                                            100 %




                  7,200                                                                                                                                                            80 %




                  3,600                                                                                                                                                            60 %
       (Rooms)




                     0                                                                                                                                                             40 %




                 -3,600                                                                                                                                                            20 %




                 -7,200                                                                                                                                                            0%
                     1995   1996   1997       1998     1999    2000   2001      2002   2003    2004   2005    2006   2007   2008   2009    2010    2011   2012     2013   2014




PROPERTY AND PORTFOLIO RESEARCH                                                                              NORTH AMERICA                         EUROPE                        ASIA-PACIFIC
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                                               Reed Market                                 Hotel                           Atlanta                             2 Feb             Page 12
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Leisure & Hospitality Employment Growth Year-Over-Year

                                                                                        Metro      PPR54


       12 %

       10 %

        8%

        6%

        4%

        2%

        0%

       -2 %

       -4 %

       -6 %

       -8 %
          1995     1996      1997   1998    1999      2000    2001     2002      2003     2004    2005      2006   2007   2008   2009   2010       2011         2012   2013       2014


RevPAR and Room Rate Trends
Occupancies are set to decline through the end of this year, dampening the outlook for RevPAR. RevPAR declined by about 19% in 2009, and it is
expected to drop by another 2% in 2010. Last year's fall was in line with the PPR54 average, but RevPAR will continue to struggle through mid-2011 in
Atlanta. At the national level, RevPAR is expected to turn the corner this year. Not helping matters is that ADRs are also falling. Last year room rates
here descended by 13.2%, well above the PPR54 benchmark. RevPARs will remain in the red until mid-2011, when occupancies have turned around
and room rate growth is back in the black. Updated: 29-Jan-2010


CONSTRUCTION COSTS
Source: Reed Construction Data

Construction Cost Index                                                                                                      Construction Cost/SqFt

                                    Construction Cost Index          Year-Over-Year Growth                                                              Metro          U.S.

      200                                                                                                          14 %          $200
                                                                                                                   12 %
                                                                                                                                                        $161                              $161
      160                                                                                                          10 %          $160
                                                                                                                                        $137                              $134
                                                                                                                   8%

      120                                                                                                          6%            $120
                                                                                                                   4%

       80                                                                                                          2%            $80
                                                                                                                   0%
       40                                                                                                          -2 %
                                                                                                                                 $40
                                                                                                                   -4 %
       0                                                                                                           -6 %
                                                                                                                                  $0
            2002          2003      2004           2005       2006            2007         2008          2009                                  2008Q4                            2009Q4




PROPERTY AND PORTFOLIO RESEARCH                                                                     NORTH AMERICA                        EUROPE                           ASIA-PACIFIC
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                                                                Reed Market                                 Office                               Atlanta                          2 Feb             Page 13
                                                                Fundamentals                                                                                                      2010



SUPPLY, DEMAND, AND VACANCY TRENDS
Sources: PPR; Moody’s Economy.com; Reed Construction Data

Supply, Demand, and Vacancy Statistics                                         As of 2009Q4

                                                                                                        Annual Trends
                                                           2006             2007                 2008                2009              2010             2011               2012            2013               2014
Change in Supply*                                         2,403            4,320                2,875               3,003             1,455              714              1,170           1,781              2,275
Change in Demand*                                         2,424            3,846                 -168              -4,764            -1,100            1,446              4,930           7,339              6,597
Vacancy Rate (Q4)                                        21.5 %           21.2 %               22.4 %             25.9 %            27.0 %            26.5 %             24.6 %          21.7 %             19.4 %

                                                                                                    Quarterly Trends
                                                         2008Q4          2009Q1            2009Q2                2009Q3            2009Q4             2010Q1         2010Q2              2010Q3             2010Q4
Change in Supply*                                          1,298               0              1,361                 1,513               129               705            500                    0               250
Change in Demand*                                           -342            -728             -1,626                -1,114            -1,296              -868           -308                  -34               110
Vacancy Rate                                              22.4 %          22.8 %            24.1 %                25.2 %            25.9 %             26.6 %         26.9 %              26.9 %             27.0 %
*In Thousands of SqFt


Quarterly Supply, Demand, and Vacancy                                          As of 2009Q4




                                                                                 Change in Demand           Change in Supply           Vacancy Rate


                              3,300                                                                                                                                                                  30 %




                                                                                                                                                                                                     25 %
                              2,200



                                                                                                                                                                                                     20 %
        (SqFt in Thousands)




                              1,100


                                                                                                                                                                                                     15 %


                                  0

                                                                                                                                                                                                     10 %



                              -1,100
                                                                                                                                                                                                     5%




                              -2,200                                                                                                                                                                 0%
                                  1995    1996   1997    1998   1999    2000     2001   2002     2003     2004     2005     2006   2007   2008     2009    2010   2011     2012   2013     2014


Historical and Forecast Summary                                    As of 2009Q4

                                       Historical Peak and Trough                                         Historical Volatility                             Average Annual Growth Rates
                                                                                                                                                                        Historical                Forecast
                                             Peak         Period       Trough         Period                                                                         Metro      PPR54          Metro    PPR54
Vacancy Rate                                25.9 %       2009Q4          9.3 %       1996Q2       Supply Volatility Ratio              1.67      Supply              4.5 %       2.8 %         0.7 %     0.6 %
Demand (Annual)                             8,766*         1987        -4,764*         2009       Demand Volatility Ratio              1.65      Demand              3.9 %       2.2 %         2.4 %     1.8 %
Supply (Annual)                            11,499*         1986           622*         1993       Correlation                          0.29      Net Demand         -0.6 %      -0.6 %         1.7 %     1.2 %
*In Thousands of SqFt


Demand Trends
Renewals and relocations within the metro dominate leasing activity in Atlanta. Smaller firms, those taking up less than 100,000 SF, continue to
shed office space throughout the metro, and overall leasing activity remains slow. Though some deals are getting done, most of the action is
concentrated on renewals. Sutherland, Asbill, and Brennan recently renewed its lease for 240,900 SF at 999 Peachtree, PC Management will remain in
its 212,100 SF space at Piedmont Center, and PM Realty Group renewed for 135,000 SF at River Ridge in the Central Perimeter. SunTrust Robinson
Humphrey recently renewed its lease at Atlanta Financial Center, occupying 92,000 SF in the building. In addition, the AJC is planning to vacate its
downtown digs for 128,000 SF in the Central Perimeter, which will result in some vacant sublease space in the CBD. Turner Construction recently inked
a deal for 30,000 SF at the new Two Alliance Center. Finally, Bank of America has renewed its lease at the Marquee in Midtown, but it is unclear how
much space they will be occupying. That said, there have been some corporate relocations and expansions within the Atlanta metro. For instance, NCR
is moving its headquarters to the metro from Ohio. Sony Ericsson is reportedly planning to bring 175 jobs to Atlanta, taking down as much as 35,000 SF
of office space.



PROPERTY AND PORTFOLIO RESEARCH                                                                                           NORTH AMERICA                           EUROPE                      ASIA-PACIFIC
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                                                                              Reed Market                                                              Office                    Atlanta                 2 Feb               Page 14
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Local law firms continue to make waves in the office market. Several law firms within the Atlanta metro are reportedly scouting out new digs before
their leases expire within the next two years. McGuireWoods LLP, currently at the Proscenium building in Midtown, is looking for up to 60,000 SF.; its
lease is set to roll in May of 2011. Alston & Bird (the metro’s largest law firm) is supposedly looking into building a new tower in Midtown next year,
leaving behind space at One Atlantic Center. Weinberg, Wheelers, Hudgins, & Dial LLC is also working on inking a deal at the new 3344 Peachtree for
60,000 SF-70,000 SF of space, leaving behind space at Atlanta Plaza. And finally, Greenberg Traurig LLP is reportedly looking at a 125,000 SF lease in
the new Terminus 200. The amount of office space on the market to chose from (and the concessions and rent breaks that accompany it), especially
new Class A buildings, is surely piquing the interest of these law firms. That said, some law firms have decided to stay put in this uncertain environment.
Sutherland Asbill & Brennan recently renewed its 241,000 SF lease at 999 Peachtree (expiring in 2020). In the near term, distress in the market and a
wave of new supply coming on line in Buckhead and Midtown will keep tenants on top, and landlords will likely have to readjust their lease rate
projections in order to remain competitive.

Given the large, diverse economy and the friendly business environment, employment growth (in key office-related industries) is expected to accelerate
in the outer years of the forecast. Consequently, the Atlanta office market has one of the most compelling recovery stories in the PPR54. But this
forecast is not without risk, as job growth and office demand depend on in-migration. The state of the national housing market is depressing mobility, as
homeowners are still struggling to sell their homes. More muted demographics trends could spell trouble for Atlanta’s office demand forecast. Updated:
19-Jan-2010


Supply Trends
Oversupply in Atlanta's core office submarkets is still the major supply story here. Several major high-rise office towers are starting to top out in
Buckhead and Midtown, with delivery dates set for later this year. In fact, from 2009–10 more than 2.6 million SF of new office space is set to come on
line in these two submarkets. According to CoStar Group, projects of interest include Daniel Corporation's 12th & Midtown project (encompassing
roughly 700,000 SF of office space) and the 500,000 SF Phipps Tower. Unfortunately, this supply wave is delivering into a down market, and rough seas
lie ahead for fundamentals, leaving tenants with their hands on the rudder. As a result, landlords will likely offer substantial concessions and incentives in
order to keep tenants in their buildings.

Don't expect many changes to the Atlanta skyline within the next 18 months (beyond what's already underway). On the whole, developers are
relatively tame in this market. There is little capital to fund new projects, and this dearth will likely continue in the near term. As a result, more projects
are getting delayed. For example, Duke Realty delayed construction on its 170,000 SF Legacy 1000 building in Duluth, which was slated to begin at the
start of this year. And in some cases, sizable preleasing requirements are sending developers back to the drawing board to downsize planned projects.
Outer-year deliveries could be beefier than expected, given the metro's developer-friendly environment and rapidly improving fundamentals. Updated: 25-
Jan-2010


Major Construction Projects
                                                                                                                                                                                         Size            Target                  Target
Title                                                                                                      Submarket                                 City           Status             (SqFt)               Start            Completion
12th & Midtown Tower Phase II                                                                              Midtown                                   ATLANTA        Underway          680,000          Jan 2008                Mar 2010
Phipps Tower                                                                                               Buckhead                                  ATLANTA        Underway          500,000          Dec 2007                May 2010
3630 Peachtree                                                                                             Buckhead                                  Atlanta        Underway          425,000           Jul 2007               Mar 2010
Cobb Energy Centre (northern tower)                                                                        Northwest                                 ATLANTA        Underway          400,000          Dec 2007                Oct 2010
Midtown Mixed Use                                                                                          Midtown                                   ATLANTA        Underway          150,000          May 2008                Nov 2010


Office-Using Employment Growth Year-Over-Year                                                                                                             Office-Using Employment Composition
                                                                                                                                                                                   % of Office-Using            Year-Over-Year
                                                         Metro                       PPR54                                                                                           Employment                    Growth
                                                                                                                                                                                     Metro       PPR54               Metro     PPR54
    15 %                                                                                                                                                   Information              11.5 %        8.1 %             -5.0 %     -6.0 %
                                                                                                                                                           Admin & Support          18.9 %       14.3 %              0.4 %     -3.2 %
                                                                                                                                                           Health                    2.0 %        3.2 %              6.8 %      1.3 %
    10 %                                                                                                                                                   Management of             8.0 %        4.6 %              0.3 %     -3.8 %
                                                                                                                                                           Companies
                                                                                                                                                           Finance & Insurance      13.7 %       18.3 %         -13.4 %         -3.3 %
     5%                                                                                                                                                    Prof, Sci & Tech         23.5 %       26.7 %          -8.2 %         -2.6 %
                                                                                                                                                           Services
                                                                                                                                                           Real Estate               6.0 %        6.4 %             -3.8 %      -2.6 %
     0%                                                                                                                                                    Other                    16.5 %       18.4 %             -2.8 %      -2.3 %


     -5 %


    -10 %
        1995
               1996
                      1997
                             1998
                                    1999

                                           2000
                                                  2001
                                                         2002
                                                                2003
                                                                       2004
                                                                              2005
                                                                                      2006
                                                                                             2007
                                                                                                    2008
                                                                                                           2009
                                                                                                                  2010
                                                                                                                         2011
                                                                                                                                2012
                                                                                                                                       2013
                                                                                                                                              2014




PROPERTY AND PORTFOLIO RESEARCH                                                                                                                                 NORTH AMERICA                EUROPE                    ASIA-PACIFIC
                                 R
                                            Reed Market                               Office                   Atlanta                          2 Feb          Page 15
                                            Fundamentals                                                                                        2010




CONSTRUCTION COSTS
Source: Reed Construction Data

Construction Cost Index                                                                                         Construction Cost/SqFt

                                 Construction Cost Index          Year-Over-Year Growth                                                  Metro      U.S.

      200                                                                                              14 %       $200
                                                                                                       12 %                              $166                           $165
      160                                                                                              10 %       $160
                                                                                                                         $141                           $137
                                                                                                       8%

      120                                                                                              6%         $120
                                                                                                       4%

       80                                                                                              2%          $80
                                                                                                       0%
       40                                                                                              -2 %
                                                                                                                   $40
                                                                                                       -4 %
       0                                                                                               -6 %
                                                                                                                   $0
            2002     2003        2004         2005         2006          2007        2008       2009                            2008Q4                         2009Q4




PROPERTY AND PORTFOLIO RESEARCH                                                                NORTH AMERICA              EUROPE                        ASIA-PACIFIC
                                                    R
                                                                  Reed Market                                  Retail                              Atlanta                         2 Feb            Page 16
                                                                  Fundamentals                                                                                                     2010



SUPPLY, DEMAND, AND VACANCY TRENDS
Sources: PPR; Moody’s Economy.com; Reed Construction Data

Supply, Demand, and Vacancy Statistics                                            As of 2009Q4

                                                                                                           Annual Trends
                                                           2006                2007                 2008               2009            2010              2011               2012            2013              2014
Change in Supply*                                         6,753               6,032                5,040              5,209             770               994              2,035           2,964             3,870
Change in Demand*                                         6,092               3,029               -2,038             -5,473             727             4,871              7,328           6,641             5,796
Vacancy Rate (Q4)                                        15.5 %              16.6 %              19.8 %             24.7 %           24.6 %            22.6 %             19.7 %          17.6 %            16.4 %

                                                                                                      Quarterly Trends
                                                        2008Q4              2009Q1           2009Q2                 2009Q3           2009Q4            2010Q1         2010Q2              2010Q3            2010Q4
Change in Supply*                                          2,150                 652              967                 2,340            1,250               125            525                 120                 0
Change in Demand*                                         -1,625              -1,931           -2,741                  -264             -536              -276             58                 390               554
Vacancy Rate                                             19.8 %              21.1 %           22.9 %                 24.0 %           24.7 %            24.9 %         25.1 %              24.9 %            24.6 %
*In Thousands of SqFt


Quarterly Supply, Demand, and Vacancy                                             As of 2009Q4




                                                                                   Change in Demand            Change in Supply         Vacancy Rate


                              3,300                                                                                                                                                                  30 %




                              2,200                                                                                                                                                                  25 %




                              1,100                                                                                                                                                                  20 %
        (SqFt in Thousands)




                                  0                                                                                                                                                                  15 %




                              -1,100                                                                                                                                                                 10 %




                              -2,200                                                                                                                                                                 5%




                              -3,300                                                                                                                                                                 0%
                                  1995    1996   1997   1998      1999     2000    2001   2002      2003     2004     2005    2006   2007   2008    2009    2010   2011     2012   2013     2014


Historical and Forecast Summary                                     As of 2009Q4

                                       Historical Peak and Trough                                           Historical Volatility                            Average Annual Growth Rates
                                                                                                                                                                        Historical                Forecast
                                            Peak         Period          Trough         Period                                                                       Metro      PPR54          Metro    PPR54
Vacancy Rate                               24.7 %       2009Q4             8.8 %       1987Q1       Supply Volatility Ratio             2.29   Supply                3.8 %       2.3 %         1.1 %     0.8 %
Demand (Annual)                            8,819*         1998           -5,473*         2009       Demand Volatility Ratio             1.24   Demand                3.6 %       2.3 %         3.2 %     2.0 %
Supply (Annual)                            7,184*         2001            1,007*         1983       Correlation                         0.05   Net Demand           -0.2 %       0.0 %         2.1 %     1.2 %
*In Thousands of SqFt


Demand Trends
Near-term leasing strategies will likely continue to focus on maintaining current tenants by offering discounts and/or lowering rents. Poor
fundamentals have left retail leasing on shaky ground, and vacant space continues to mount, especially in suburban shopping centers. Job losses and
overall uncertainty in the economy have slashed consumer spending. And with the unemployment rate slated to reach nearly 11%, the near-term outlook
is bleak. The housing market downturn has cut into furniture, electronics, and home improvement purchases as well. The tenants who are still standing
are asking landlords for more concessions or downsizing their footprints. The third and fourth quarter yielded some decent-sized leases, but big-box
tenants were few and far between. Yet, many of the deals inked recently, fell between 25,000 and 50,000 SF. According to CoStar Group, Hobby Lobby
leased 45,000 SF at the Barrett Pavilion and Goodwill leased 44,600 SF at Merchant's Crossing. In addition, Costco (148,000 SF), LA Fitness (45,000
SF), and Publix (56,820 SF) recently took down space at Town Brookhaven.




PROPERTY AND PORTFOLIO RESEARCH                                                                                              NORTH AMERICA                         EUROPE                      ASIA-PACIFIC
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                                             Reed Market                       Retail                     Atlanta                  2 Feb         Page 17
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Recently completed projects may face an uphill battle. Within the past year, several large retail projects have come on line, including the 600,000 SF
Town Brookhaven, the 500,000 SF Canton Marketplace, and a 500,000 SF center in Loganville. However, these projects received financing several
years ago and got underway just as the market had started to turn. Some of these developments have fared well; in fact, the Canton Marketplace and
the Loganville shopping center are 95% and 94% occupied, respectively (per CoStar Group). Meanwhile, Town Brookhaven was only 47% occupied as
of the fourth quarter. However, has been some recent leasing activity, with Costco and LA Fitness taking down space in this center in the third quarter,
equating to about 192,000 SF.

The demand recovery remains compelling in Atlanta for several reasons. Once the economy starts to turn the corner, this market will see a pop in
pent-up demand from residents who need to or want to spend money. Atlanta also maintains solid long-run drivers of retail sales growth. The need for
retail will expand with the metro's population, as more "stuff" is needed to fill houses and apartments. Over the next five years, the local population base
is expected to expand by an average of more than 2% per year as nearly 63,000 new residents move into the metro (ranked in the top 10 among the
PPR54). And as Atlanta continues to urbanize, areas inside the perimeter stand to gain the most. Also, the metro's projected growth in the number of
35–54-year-olds over the next five years is among the highest in the 54 markets tracked by PPR. The number of higher-paying white-collar jobs is also
set to increase, bolstering above-average median household incomes and likely giving a boost to discretionary spending. Updated: 25-Jan-2010

Supply Trends
Recently completed projects may face an uphill battle. Within the past year, several large retail projects have come on line, including the 600,000 SF
Town Brookhaven, the 500,000 SF Canton Marketplace, and a 500,000 SF center in Loganville. However, these projects received financing several
years ago and got underway just as the market had started to turn. Some of these developments have fared well; in fact, the Canton Marketplace and
the Loganville shopping center are 95% and 94% occupied, respectively (per CoStar Group). Meanwhile, Town Brookhaven was only 47% occupied as
of the fourth quarter. However, has been some recent leasing activity, with Costco and LA Fitness taking down space in this center in the third quarter,
equating to about 192,000 SF.

A few smaller projects are set to deliver within the next two quarters, per CoStar, but the reprieve in construction is much needed in Atlanta.
With decision-making taking longer, retailers remaining cautious about expansion, and financing still hard to come by, developers are leery of breaking
ground on any major retail project. Supply deliveries are falling steeply, as financing for new product remains elusive, and some of the functionally
obsolete space will get demolished for development. Even still, from 2011–14 roughly 8.7 million SF of new space is slated to come on line in the Atlanta
market, more than 4% of the metro’s current inventory. Supply can ramp up rather quickly here, and the outer-year deliveries could be stronger than
anticipated. Updated: 25-Jan-2010

Major Construction Projects
                                                                                                                        Size         Target           Target
Title                                        Subclass                     City                       Status           (SqFt)           Start      Completion
Harbins Crossing Towne Center                Big-Box/Power Center         DACULA                     Underway        650,000       Dec 2007         May 2010
Town Brookhaven                              Big-Box/Power Center         Atlanta                    Completed       600,000       Apr 2007         Dec 2009
Suwanee Gateway                              Big-Box/Power Center         TROY                       Underway        360,000       Oct 2007         Oct 2011
Westside Crossing                            Big-Box/Power Center         ATLANTA                    Completed       300,000       Jun 2008         Oct 2009
Sugar Hill Marketplace                       Big-Box/Power Center         NORTH LAS VEGAS            Underway        250,000       Dec 2007         Aug 2009


Retail Demand Drivers
                                                                                 Metro                                           United States
                                                                                                      Rank of 54
                                                           Current (2009Q4)    Year-Ago    Growth      (Current)    Current (2009Q4)     Year-Ago    Growth
Real Retail Sales Per Capita Past 12 Months                           $6,086     $6,387     -4.7 %            37               $6,273       $6,360    -1.4 %
Median Household Income                                              $53,810    $55,332     -2.8 %            24              $50,699      $49,913     1.6 %
Real Retail Sales (Total) Past 12 Months (Millions)                  $33,655    $34,655     -2.9 %             8          $1,935,472    $1,943,215    -0.4 %


Retail Subclass Trends
Atlanta is known to be perpetually over-retailed. Surprisingly, however, this market falls in the middle of the PPR54 pack in terms of mall SF per capita.
Though Atlanta does maintain some large regional malls, there is a significant amount of smaller (and older) strip centers and ground-floor retail in the
overall inventory. On the grocery front, Kroger remains the top grocer in Atlanta, garnering 32% of the market share in over 130 stores. Publix has fallen
to third place (22% of the market share) behind Wal-Mart, though it still maintains 141 stores in the metro.

Though store closure announcements have subsided, the market isn't out of the woods just yet. Shopping centers are clearly bearing the brunt of this
downturn, as vacancy rates in this subclass have skyrocketed over the past year. Malls have been struggling throughout the nation, and Atlanta is no
exception. This property subclass maintains one of the lowest vacancy rates in the metro, per CoStar Group. But malls only make up relatively small
percentage of the metro's total inventory while shopping centers account for the largest share, per CoStar Group. Going forward, shopping centers and
power centers will likely continue to struggle to fill up empty space as credit-worthy tenants are still hard to come by. Updated: 26-Jan-2010




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                                            Reed Market                               Retail                   Atlanta                         2 Feb         Page 18
                                            Fundamentals                                                                                       2010




CONSTRUCTION COSTS
Source: Reed Construction Data

Construction Cost Index                                                                                         Construction Cost/SqFt

                                 Construction Cost Index          Year-Over-Year Growth                                                 Metro      U.S.

      200                                                                                              14 %       $200

                                                                                                       12 %

      160                                                                                              10 %       $160
                                                                                                       8%

      120                                                                                              6%         $120                  $113                          $113
                                                                                                                         $96                           $94
                                                                                                       4%

       80                                                                                              2%          $80
                                                                                                       0%
       40                                                                                              -2 %        $40
                                                                                                       -4 %
       0                                                                                               -6 %
                                                                                                                   $0
            2002     2003        2004         2005         2006          2007        2008       2009                           2008Q4                        2009Q4




PROPERTY AND PORTFOLIO RESEARCH                                                                NORTH AMERICA              EUROPE                       ASIA-PACIFIC
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                                                                Reed Market                                 Warehouse                            Atlanta                          2 Feb            Page 19
                                                                Fundamentals                                                                                                      2010



SUPPLY, DEMAND, AND VACANCY TRENDS
Sources: PPR; Moody’s Economy.com; Reed Construction Data

Supply, Demand, and Vacancy Statistics                                         As of 2009Q4

                                                                                                        Annual Trends
                                                           2006             2007                 2008                2009             2010              2011               2012            2013              2014
Change in Supply*                                        13,037            8,155                5,079               2,866              100               571              2,468           5,173             6,433
Change in Demand*                                         9,853            6,441                  399              -7,079            2,692             9,252             12,533           8,947             7,659
Vacancy Rate (Q4)                                        14.6 %           14.8 %               16.0 %             18.7 %            18.0 %            15.4 %             12.4 %          11.1 %            10.6 %

                                                                                                    Quarterly Trends
                                                         2008Q4          2009Q1            2009Q2                2009Q3            2009Q4             2010Q1        2010Q2               2010Q3          2010Q4
Change in Supply*                                          1,477           1,010                371                   485             1,000                 0             0                  100               0
Change in Demand*                                           -351            -541             -2,317                -2,909            -1,312               456           791                  767             679
Vacancy Rate                                              16.0 %          16.4 %            17.1 %                18.1 %            18.7 %             18.6 %        18.4 %               18.2 %          18.0 %
*In Thousands of SqFt


Quarterly Supply, Demand, and Vacancy                                          As of 2009Q4




                                                                                 Change in Demand           Change in Supply           Vacancy Rate


                              5,100                                                                                                                                                                 20 %


                                                                                                                                                                                                    18 %


                              3,400                                                                                                                                                                 16 %


                                                                                                                                                                                                    14 %
        (SqFt in Thousands)




                              1,700                                                                                                                                                                 12 %


                                                                                                                                                                                                    10 %


                                  0                                                                                                                                                                 8%


                                                                                                                                                                                                    6%


                              -1,700                                                                                                                                                                4%


                                                                                                                                                                                                    2%


                              -3,400                                                                                                                                                                0%
                                  1995    1996   1997    1998   1999    2000     2001   2002     2003     2004     2005     2006   2007   2008     2009    2010   2011     2012   2013     2014


Historical and Forecast Summary                                    As of 2009Q4

                                       Historical Peak and Trough                                         Historical Volatility                             Average Annual Growth Rates
                                                                                                                                                                        Historical               Forecast
                                             Peak         Period       Trough         Period                                                                         Metro      PPR54         Metro    PPR54
Vacancy Rate                                18.7 %       2009Q4          1.7 %       1984Q2       Supply Volatility Ratio              1.49      Supply              3.1 %       2.5 %        0.9 %     0.9 %
Demand (Annual)                            12,802*         2000        -7,079*         2009       Demand Volatility Ratio              1.27      Demand              2.5 %       2.2 %        2.8 %     2.0 %
Supply (Annual)                            15,700*         2001           785*         1991       Correlation                          0.60      Net Demand         -0.6 %      -0.3 %        2.0 %     1.1 %
*In Thousands of SqFt


Demand Trends
Warehouse absorption remains weak in Atlanta. Although some large leases have been signed recently, these deals haven't been enough to negate
the space givebacks. According to CoStar Group, the fourth quarter yielded some large deals. Deere & Co. took 402,000 SF at the Westbridge
Distribution Center in South Clayton; Viega leased 255,000 SF at the Greenwood Industrial Building, also in South Clayton; and Clorox Products
renewed its 180,300 SF lease at the Newport Distribution Center in the Duluth area. FEMA recently signed at 10-year lease for 407,000 SF of space at
the Airport Distribution Center II (with plans to move in in March). This will become the agency's Southeast hub. Some smaller renewals have also
occurred recently, and firms staying put include Beltmann Group, Reliable Tire Distributors, and Turf Care Supply. Landlords will continue to offer very
attractive incentives in order to maintain occupancies, and renewals will likely continue to dominate leasing activity in the near term. In the uncertain
economic environment, firms are unwilling to commit to space and are opting for one- or two-year lease renewals.




PROPERTY AND PORTFOLIO RESEARCH                                                                                           NORTH AMERICA                           EUROPE                      ASIA-PACIFIC
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                                              Reed Market                           Warehouse                        Atlanta                  2 Feb          Page 20
                                              Fundamentals                                                                                    2010



Sublease remains an issue in the local warehouse market. Per CoStar Group, sublease space in the warehouse market expanded by nearly 30% in
Atlanta from the third to the fourth quarter, increasing to about 2.7 million SF. Although the market has worked through a lot of the pain, there is a large
amount of empty space to contend with here. This will lead vacancies even higher and rents lower over the next several months.

The short–term outlook is precarious, but there are some bright spots. Firms related to less cyclical industries, such as food and groceries, are
leaving a good taste in Atlanta's mouth. Recently, J.M. Smucker announced plans to locate near the airport – leasing all 557,000 SF in South Creek IV.
General Mills, Pop Secret, and Trader Joe’s are also seeking to establish their Southeast distribution centers here. And Atlanta's long–term prospects for
demand growth are favorable, supported by the metro's below–average business costs; extensive road, rail, and air transportation links; and reasonable
proximity to the thriving Port of Savannah. This metro is also one of the epicenters of population growth within the Southeast, which bodes well for
demand from tenants providing "stuff" to consumers. Tenants associated with cargo flows and the airport will look to South Atlanta for distribution space,
while retailers servicing the quickly growing Carolinas area will plant roots along the Northeast Corridor. And firms that need direct access to the Port of
Savannah will be attracted to the I–20 East/Snapfinger Submarket. Updated: 01-Feb-2010

Supply Trends
The frozen credit markets and depressed demand are slowing the pace of construction in this normally developer-friendly market. There are
very few warehouse projects underway in the Atlanta metro, and this lull in construction will ultimately aid in the market's recovery. Speculative projects
that delivered within the past year include the 240,000 SF warehouse at 120 Declaration Drive and two buildings at the Cherokee Commerce center
totaling more than 300,000 SF. Developers will be slow to bring more product to market over the forecast, given the metro's elevated vacancy rate. Yet
Atlanta's abundant affordable land and its cooperative local government give developers a perpetual green light.

Supply-side risks are concentrated in Atlanta's major warehousing nodes. Areas like the CBD and Stone Mountain are less likely to attract
developer attention in the future, as long-run demand trends are less than stellar in these areas. Construction will remain laser-focused in the Northwest
(along I-75), the Northeast (along I-85), South Atlanta (along I-75 and near the airport), and in the I-20 East and West submarkets. Tenants will look to
set up shop in these submarkets due to their access to major nodes of transportation: highways, the airport, and the Port of Savannah. As a result, keep
a watchful eye on new supply deliveries once the credit markets begin to loosen up and vacancies contract. In fact, some developers are already
gearing up to bring new product to the Atlanta market. Alter Group plans to purchase the 180-acre King Mill site in Henry County and build approximately
three million SF of warehouse/distribution space on it. In addition, IDI is nearing a deal with Clorox to build a 1.1 million SF build-to-suit in Fulton County,
which would consolidate the firms existing warehouse leases in Atlanta. Updated: 01-Feb-2010

Major Construction Projects
                                                                                                              Size               Target                         Target
Title              Submarket                         City             Status                                (SqFt)                Start                      Completion



Wholesale Trade Employment Growth Year-Over-Year

                                                                                 Metro      PPR54


         12 %



          8%



          4%



          0%



         -4 %



         -8 %



        -12 %
            1995    1996   1997       1998   1999   2000    2001   2002   2003      2004   2005     2006   2007   2008   2009   2010   2011   2012    2013   2014




PROPERTY AND PORTFOLIO RESEARCH                                                             NORTH AMERICA                       EUROPE                  ASIA-PACIFIC
                                 R
                                            Reed Market                               Warehouse             Atlanta                         2 Feb         Page 21
                                            Fundamentals                                                                                    2010




CONSTRUCTION COSTS
Source: Reed Construction Data

Construction Cost Index                                                                                      Construction Cost/SqFt

                                 Construction Cost Index          Year-Over-Year Growth                                              Metro      U.S.

      200                                                                                           14 %       $200

                                                                                                    12 %

      160                                                                                           10 %       $160
                                                                                                    8%
      120                                                                                           6%         $120
                                                                                                                                     $102                          $101
                                                                                                    4%                $87                           $84
       80                                                                                           2%          $80
                                                                                                    0%

       40                                                                                           -2 %        $40
                                                                                                    -4 %

       0                                                                                            -6 %
                                                                                                                $0
            2002     2003        2004         2005         2006          2007        2008    2009                           2008Q4                        2009Q4




PROPERTY AND PORTFOLIO RESEARCH                                                             NORTH AMERICA              EUROPE                       ASIA-PACIFIC

				
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